Briefing: ‘Offices are becoming more like hotels’

Flexibility has become a buzzword but investors must tread carefully in the co-working space, experts agreed at Real Asset Media’s European Outlook Briefing, which took place in New York last week. 

‘There is a lot of co-working popping up but there are also a lot of smaller players going out of business all the time,’ said James Duong, head of business development, Spaceflow. ‘That is why it is important to know the market and have accurate information and data on the consumers’.

Accessing the market panel, New York, February 2019

The sector’s rapid growth has led to an oversupply of operators, ‘some good and some less good,’ Alexander Fischbaum, Managing Director, AF Advisory, said. ‘As soon as the economy turns, there will be consolidation.’

Flexibility is also more expensive, he pointed out: ‘It will cost you more to fit the office out, so it needs a higher investment, and financing will also be more difficult because a lot of banks will say no so your costs will go up.’

There is a cost to flexibility but ‘it is better than being locked in a ten-year contract, because in the end you will make savings,’ said Guillaume Turcas, Managing Partner, Faro Capital. There is no turning back, as tenants now demand flexibility.

Contrary to what most people assume, he said, ‘the main tenants for co-working are not start-ups or young tech guys, but 60% are big corporates that are seeking to attract the best talent from universities and they know that they wouldn’t want to be in some campus miles from the city in the middle of nowhere.’ 

Location is becoming increasingly crucial, because people want to be in city centres and providing good service is also key. Investors must keep up to date with evolving trends, such as offices ‘drifting into hotels,’ Turcas said. ‘There is change coming, and investors must be careful in choosing not just their tenants but also their operators, just like in a hotel’.

Social interaction is what is really driving and sustaining the co-working phenomenon, Duong said: ‘You must create a community. In order to build stickiness, you must really curate the experience within the building, but also think beyond the building to the block and the neighbourhood. It is always work in progress’.  

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